Leverage

Tender Offers and Leverage

Why High Leverage is Optimal for Banks

Liquidity production is a central role of banks. When there is a market premium for the production of (socially valuable) liquid financial claims and no...

Is the American Public Corporation in Trouble?

We examine the current state of the American public corporation and how it has evolved over the last forty years. There are fewer public corporations now...

Snow and Leverage

COVID-19 and Corporate Finance

We distill evidence about the effects of COVID-19 on companies. Stock price reactions to the shock differed greatly across firms, depending on their...

Leveraged Buyouts: An Overview of the Literature

This paper provides an exhaustive literature review of the motives for public-to-private LBO transactions. First, the paper develops the theoretical...

Leverage in Pyramids: When Debt Leads To Higher Dividends

Climate Risk and Capital Structure

We use firm-level data that measure forward-looking physical climate risk to examine the impact of climate risk on capital structure. We find...

The Dark Side of Liquidity Creation: Leverage and Systemic Risk

We consider a model in which the threat of bank liquidations by creditors as well as equity-based compensation incentives both discipline bankers, but...

Revealed Preferences for Corporate Leverage

How Important is Moral Hazard for Distressed Banks?

The moral hazard incentives of the bank safety net predict that distressed banks take on more risk and higher leverage. Since many factors reduce these...

Caught between Scylla and Charybdis? Regulating Bank Leverage When There is Rent Seeking and Risk Shifting

We develop a theory of optimal bank leverage in which the benefit of debt in inducing loan monitoring is balanced against the benefit of equity in...